LandedPulseWhat is the difference between the nominal and the effective rate?
The nominal rate is the percentage printed in the tariff schedule against a heading. The effective rate is what the shipment actually costs as a proportion of goods value once the duty base, surcharges and taxes are applied — it is almost always higher.
Two things drive the gap. First, duty is charged on the customs value, which includes freight and insurance, not on the invoice price alone. Second, surcharges under programmes such as Section 301 stack on top of the base rate without appearing in the schedule entry.
Value-added tax then compounds the difference, because it is levied over a base that already contains the duty. A jurisdiction with a 2% nominal duty and 20% VAT does not cost 22% of goods value — it costs more, because the VAT applies to the freight and duty as well.
Quoting a buyer from the nominal rate is the most common way importers lose margin they thought they had. The effective rate is the only figure worth putting in a quotation.
Last reviewed . General guidance on import duty mechanics, not customs or tax advice for a specific shipment.